Can a bank foreclose a mortgage against Florida homestead property owned by a married person when his or her spouse did not join in the mortgage?

Florida Constitution, Article X, Section 4(c) provides in pertinent part: “The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale, or gift….”  Thus, the Constitution requires the owner’s spouse to join in any alienation of the homestead property.

In the case of Pitts v. Pastore, 561 So. 2d 297 (2d DCA 1990), the Court applied this constitutional provision to a mortgage of homestead property that was executed by a man who was the sole owner of the property, but was also married at the time, and the wife did not sign or otherwise join in the mortgage. The Court held that such a mortgage is not void ab initio but is ineffectual as a lien until such time as either the spouse joins in the mortgage or the property loses its homestead status (which it did in that case when the man and woman divorced).

Assuming the borrower/mortgagor was married at the time he or she executed the mortgage and the property was and still qualifies as homestead, then the lien of the mortgage never attached to the property and, as a result, the bank cannot enforce its mortgage against the property and cannot foreclose. Of course, the borrower may still be liable on the note, and may be subject to claims of mortgage fraud if he or she represented to the lender he was not married.

However, there is a Florida Supreme Court case from 1940 called Bigelow v. Dunphe, 197 So. 328 (Fla. 1940) in which the Court held that it is the lender’s burden to determine whether property on which it is taking a mortgage is homestead or not and that the lender may not rely solely on the public records or statements of the borrower. The Court stated: “The fact of actual possession and use as the home of the family was one against which the lender could not shut his eyes. Every person dealing with land must take notice of an actual, open, and exclusive possession; and where this, concurring with interest in the possessor, makes it a homestead, the lender stands charged with notice of that fact, it matters not what declarations to the contrary the borrower may make.'”

In a hypothetical case, the public records may have shown the borrower was married at the time he or she executed the mortgage, which would further weaken the bank’s case, which is already weak if the borrower told bank representatives, before execution of the mortgage, that he or she is in fact married. The lender cannot rightfully say it was the borrower’s duty to disclose his or her marital status or the homestead status of the property. If the borrower made any affirmative misrepresentations, then the bank may have a claim against the borrower for fraud, but the lien of the mortgage would still not attach.

There is a caveat to all this. In Palm Beach Savings & Loan Ass’n v. Fishbein, 619 So. 2d 267 (Fla. 1993), the Florida Supreme Court ruled that a bank that took a mortgage on a marital residence, after the husband forged the wife’s name on the loan documents, was entitled to an equitable lien against the residence, even though it was homestead, to the extent that the bank’s funds were used to satisfy preexisting mortgages and taxes on the property, even though the wife had not been a party to the fraud. The Court’s rationale was basically that the wife had benefited from the prior liens being paid off and she would be unjustly enriched if she could keep the property free and clear of all liens.

Therefore, even though homestead would prevent the lien of the mortgage from taking effect, the bank might be entitled to an equitable lien to the extent the mortgage proceeds were used to pay off prior mortgages, taxes, or other liens.